Cost and What to Avoid when Buying Homeowners Insurance
How Much Is Homeowners Insurance?
Good question. The answer? A lot or a little, depending on what kind of homeowners insurance coverage you want. Just as a general rule of thumb, you can likely expect to pay about $35 per month for every hundred thousand worth of dollar value in your home. If you live in Tornado Alley or an earthquake zone, you'll pay more for home insurance because of the higher risk.
Probably a better question is, how much home insurance do you need? You should consider, first of all, what it will cost you to replace your home if the worst should happen. If your house isn't worth all that much, you might want to consider insuring it for the actual cost of a rebuild, as opposed to the real value of your property, and that might mean paying a higher rate. You should consider the contents of your house the same way. You want to be able to get back into the position you were before the disaster, so often buying homeowners insurance policy that covers you for replacement cost as opposed to actual value makes sense.
Homeowners often make mistakes when insuring their homes, so let's focus on what you shouldn't do when buying homeowners insurance.
Don't Underinsure Your Home
Often, people don't carry enough home insurance to cover the cost of replacing the home if it's destroyed. Frequently, homeowners only insure the value of their mortgage, and that might not be the total value of the house. Or, they insure only to the current value of the home, which might not be even close to the actual cost of building, including supplies and labor.
Think about what it will actually cost you to rebuild, including any special features (do you have high-end woodwork or marble floors), and insure accordingly.
You live on a flood plain, and you're assuming that if the river rises, your insurer will come good? Don't count on it. Your homeowners insurance policy might not cover you for natural disasters. Ask your insurer, and buy additional disaster insurance if needed. The same goes for hurricane coverage and earthquakes.
Sure, it's going to cost you more, but if you do have to make a claim under an extraordinary occurrence, you'll be glad you paid for the additional coverage.
You might believe your maximum out-of-pocket cost would be $500, $1,000 or whatever amount you said when you were buying homeowners insurance policy. Wrong.
You might also think that you're covered if your sewer backs up, or you find mold in your home. You'd be amazed how many homeowners insurance policies either don't have this type of coverage, or have very low limits as to what you can claim.
Most of the time, additional coverage for sewage backup isn't all that expensive. It might only cost you fifty dollars extra in the run of a year, and its well worth it. Mold insurance, on the other hand, can run up to $500 extra, supposing that you're able to get it.
Get the sewage insurance, but think long and hard about mold. If you live in an area that's very humid, or if you have an older home that was built before mold-resistant materials were invented, then maybe it's worth the extra money. It costs a lot of money to get rid of mold, and the whole reason for home insurance is to make sure that you don't end up on the hook for huge expenses.
Despite the high cost, mold coverage could be a worthwhile expense since the cost of removal is quite high. And buying homeowners insurance, after all, is to protect you against large expenses.
The Final Word
We've talked about a few things that can ratchet up the cost of your homeowners insurance. Generally speaking, buying homeowners insurance won't cost you all that much - a bit more if there are special considerations. Don't think, though, that you should take a pass on it. Buy as much home insurance as you need, and consider special circumstances. Ideally, you'll just pay for home insurance and never need it. But if you do, your premiums are small change compared to the money you could end up being out if you have to pay for repairs out of your own pocket.